Background
Individuals who use their own vehicles for business travel have historically been able to claim 45p per business mile for the first 10,000 business miles with no tax or national insurance contribution (NIC) implications. This mileage rate has been frozen for 15 years, but as part of the governments measures intended to address rising fuel prices, the Chancellor, Rachel Reeves, recently announced a 10p per mile increase to this rate to 55p per business mile with the increase amount to take effect from 6 April 2026.
Detail
Following the government’s announcement in May of an increase of 10p per mile for approved mileage allowance payments (AMAPs), employees or self-employed indivudals using their own car or van for business travel can now claim 55p per business mile for the first 10,000 business miles in a tax year without incurring any income tax or national insurance. The increase is backdated so that it takes effect for business travel from 6 April 2026.
The AMAP covers the cost of an individual owning and running their vehicle. A separate claim for costs such as fuel, electricity, vehicle tax, MOTs or repairs cannot be made. There are different rules that apply for company cars.
The rate for AMAPs for business miles over 10,000 remains unchanged at 25p per business mile.
Separate rates apply for business mileage for motorcycles (24p) and bicycles (20p), and there is also a rate for passenger payments (5p) irrespective of the mileage level. No changes have currently been announced to these rates.
AMAPs for employees
An employer can make a payment to the employee to compensate them for the costs of using their own vehicle for business journeys. Payments cannot be made for ordinary commuting. The payment is not subject to income tax or NIC to the extent that it is below or equal to the AMAP amount.
Where the payment exceeds the AMAP amount, the excess is liable to income tax/NIC. Employers who made payments in excess of the AMAP amount may need to re-run their payroll for April to May 2026 to account for the change in the rate from 45p to 55p per mile.
The employee may claim a deduction from earnings where:
- the payment made by the employer is less than the AMAP amount, in which case the deduction is equal to the difference between the payment and the AMAP amount; or
- no payment is made, in which case the employee may claim a deduction from taxable earnings equal to the AMAP amount.
AMAPs for the self-employed
Self-employed individuals can claim a deduction for the costs of making business journeys in calculating their taxable profits. They have the option of:
- claiming for the actual costs incurred, subject to a private use adjustment where necessary; or
- claiming an amount equal to the approved mileage rate for their business miles. This is often referred to as the ‘flat rate’ or ‘simplified expenses’.
The Government has stated that all these rates will be subject to a review, and this will set out at a future Budget.
If you would like further information on any of the points raised above, or would like more information on the claiming of business mileage please contact our Tax Director, Jenny Marks.
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